http://www.ekathimerini.com/4dcgi/_w_articles_wsite3_1_26/03/2013_489977
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Omnishambles.... a new word introduced into the lexicon
http://www.zerohedge.com/news/2013-03-27/cyrpus-contagion-spreads-european-omnishambles-return-euro-under-128-first-time-nove
Cyprus Contagion Spreads As European "Omnishambles" Return; Euro Under 1.28 For First Time Since November
Submitted by Tyler Durden on 03/27/2013 06:59 -0400
- 10 Year Bond
- Bank Failures
- Bank of England
- Bank Run
- BOE
- Bond
- China
- Consumer Confidence
- European Central Bank
- fixed
- Guam
- Italy
- Jim Reid
- Market Conditions
- New Home Sales
- Nomura
- North Korea
- United Kingdom
While everyone likes to hate on Cyprus, it isItaly that is the focal point of today's European "omnishambles" that has seen the EURUSD tumble to a five month low as of this writing. First it was economic data that scared investors, with Industrial Sales and Orders tumbling far below expected, posting numbers of -1.3% and -1.4%, respectively, on expectations of an increase. Retail sales were just as ugly, declining by -0.5% in January, on expectations of an unchanged print, with the December 0.2% number revised also into negative territory.
Then Bersani, who has been tasked to form a government until tomorrow, said that the possibility of a broad coalition government does not exist, adding that no lasting government is possible without him as a premier, and requesting that Grillo's Five Star party not block his path to government, for which we wish him the best of luck as moments later Five Star ruled out all external support for a broad government and would vote no confidence for Bersani.
Then we got news that the Italian financial police has searched the Nomura in Milan in connection with the Monte Pasci case, which means even more skeletons in the closet are about to be uncovered. Finally, Italy just held a 3.5% 5 and 4.5% 10 year bond auction in which the country raised less than the maximum targeted €7 billion, and in which the Bid to Cover on the 5 Year dumping to the lowest since 2002, with bidding quite soft and the yield rising to 3.65% versus 3.59% previously. This has resulted in a blow out in Italian yields by 16 bps to 4.73% compared to 4.705% earlier.
Not helping matters was Euroarea March Economic Confidence which dropped from 91.1 to 90, missing expectations of a modest dip to 90.5, with declines seen in the Services, Retail, Construction and Business categories, and only Consumer rising modestly. The recent Cyprus risk flare out should put an end to that.
As for Slovenian bond yields, especially the 4.375% of 2021, one word: whoooooosh.
End result, as noted yesterday, has been an acceleration in the rush out of the EUR, with the EURUSD sliding to under 1.28 for the first time since November 21, a blow out in Greek bonds with yields pushing up 55 bps to 12.68% and a push for real safety (sorry, not the DJIA) in the form of German 2 Year bonds, which have dipped to -0.018%, the lowest since December, on rising fears that despite endless lies out of its bureaucrats, Europe may not be fixed after all.
Keep a close eye on Cyprus where as of right now, banks are still set to reopen tomorrow, and where moments ago the Central Bank demanded the resignations of both Laiki and Bank of Cyprus bank boards. Hardly a stamp of trust and approval 24 hours before the bank run begins.
In terms of broad activity, here is SocGen's overnight take:
The broad equity market complex tentatively moved on yesterday from the Cyprus bailout with the USD following risk assets higher despite two disappointing US economic reports, one on consumer confidence and the other on new home sales. There was some reprieve in the confidence data in that labour market conditions, and thus employment growth, are holding up. This should reinforce the positive momentum as we head into Q2, but it remains too soon for the Fed to take its foot off the accelerator. To this end, markets will be listening attentively to what Fed members Rosengren, Pianalto and Kocherlakota have to say.
US pending home sales come out today, while the focus in Europe will be on the Italian bond auctions (2018/2023) and the monthly confidence reports from the EC. The latter are set to highlight a possible worsening in economic conditions as we head towards the end of Q1, with the Cyprus bailout and ramifications for the European bank resolution framework i.e. bail-ins, possibly causing a further dent in household confidence in early Q2. A raft of Italian data is due, but the focus will be on Bersani's report to president Napolitano on his latest government talks. As discussed yesterday in ‘SEK: a double whammy', SEK bulls could be strengthening their grip on EUR/SEK which may cause a return to the February lows below 8.30 in the event of strong confidence data.
‘The last leg of the US assets rally' was released yesterday and discusses SG's latest Cross Asset strategy. It features seven key calls for the 3-12 month investor horizon with portfolio recommendations primarily based around the Fed mulling exit strategies as the US economy recovers, a China slowdown and a dovish BoE.
Finally, here is the traditional recap from DB's Jim Reid:
A day after sending markets into a spin Eurogroup President Dijsselbloem reiterated that “risks (of bank failures) should fall on those who take the risks, and not the taxpayer”. Interestingly, Mr Dijsselbloem said that he didn’t regret his comments earlier in the week and that Cyprus “does fit into the new approach towards bank rescues that is gradually evolving” (WSJ). Officials at the ECB seem to hold a slightly different view though with Beniot Coeure from the ECB’s executive board commenting that he thought Mr Dijsselbloem was “wrong to say what he said”. Those comments were echoed by Ewald Nowotny who stated that Cyprus is special case and is "no model for other instances".
In Italy, media reports suggest that the centre-left’s Bersani will meet with party leaders from the 5-Star Movement today, as part of his negotiations with major political parties to form a government. Bersani will report the results of his talks to President Napolitano later today or tomorrow. As far as current progress is concerned though, hopes of a working coalition with the centre-right’s PDL look bleak. PDL party secretary, Angelino Alfano told reporters after a meeting with Bersani yesterday that "our positions are still very distant from each other, and if they remain distant in the next 48 hours we will affirm that the only way is to go back to vote". So it looks like we will be hearing more on this in the next day or two.
Turning to Asia, the situation on the Korean peninsula remains a focus with the WSJ reporting that North Korea has ordered the country’s rocket and artillery units to be on highest alert to strike bases in the US mainland, Guam, Hawaii, and other targets in the Pacific and South Korea. The article says that the move comes after the US and South Korea signed a military contingency plan to respond to potential attacks from North Korea. South Korea earlier raised its alert level near the demilitarised border zone but that alert has been lifted as we go to print. For the time being, the news has had a muted impact on the KOSPI (+0.4%) and the Korean Won (-0.5%) but a number of Korean defense stocks are up 5 to 10% overnight.
Elsewhere in Asia equities are trading higher across the region on the back of the S&P500’s solid gain yesterday. There has been little news flow in the region outside of Korea. After a bout of risk aversion over the last week, USDJPY has resumed its climb and is trading 0.3% higher this morning at 94.75. Regional credit markets are 1-2bp firmer this morning while 10yr UST yields remain steady at 1.91%.
In terms of the day ahead, the Eurozone’s economic sentiment survey for March, Italian industrial orders and retail sales are the main data releases in the euro area. Italy will also auction 5yr and 10yr bonds. In the UK, the Bank of England’s Financial Policy Committee is due to publish a report on the capital levels of UK banks. Across the pond, US pending home sales for February will be the main focus. Several members from the Fed are scheduled to speak today including the Boston Fed’s Rosengren, the Cleveland Fed’s Pianalto and the Minneapolis Fed’s Kocherlakota.
And the view from Cyprus.....
http://www.cyprus-mail.com/boc/rush-quell-panic-over-boc/20130327
Rush to quell panic over BoC
and......
http://openeuropeblog.blogspot.com/2013/03/a-grand-coalition-with-silvio-would-be.html
Tuesday, March 26, 2013
A grand coalition with Silvio is hard to swallow for Bersani, but...
The leader of Italy's centre-left Democratic Party, Pier Luigi Bersani, is in an unenviable position right now. He has been asked by Italian President Giorgio Napolitano to go and meet pretty much everyone (trade unions, employers' associations, political parties) and see if he can get the support he needs to command a majority in Italy's hung Senate. Bersani will report back to Napolitano on Thursday, and is due to meet a delegation from Silvio Berlusconi's PdL party this afternoon.
Berlusconi is playing the hand he has been dealt quite well, taking advantage of Beppe Grillo's refusal to cooperate. Il Cavaliere has already set his conditions for supporting a Bersani-led government: Angelino Alfano (the Secretary General of Berlusconi's party) should be the Deputy Prime Minister, and a man close to the centre-right should be elected as the next Italian President.
Bersani has so far rebuffed Berlusconi's offers, but we have thought of at least three reasons why he may eventually change his mind:
Berlusconi is playing the hand he has been dealt quite well, taking advantage of Beppe Grillo's refusal to cooperate. Il Cavaliere has already set his conditions for supporting a Bersani-led government: Angelino Alfano (the Secretary General of Berlusconi's party) should be the Deputy Prime Minister, and a man close to the centre-right should be elected as the next Italian President.
Bersani has so far rebuffed Berlusconi's offers, but we have thought of at least three reasons why he may eventually change his mind:
- Bersani is probably facing a 'once in a lifetime' opportunity to become Italian Prime Minister. He is already 61 (although age is not necessarily an obstacle in Italian politics), and if Italy were to return to the polls he would likely come under huge internal pressure to step down as party leader and give way to someone else. Remember Bersani was at the front of an electoral campaign during which his centre-left alliance squandered a double-digit lead in the polls in about two months. Florence Mayor Matteo Renzi seems to be the most obvious candidate to replace Bersani in case of new elections.
- More generally, Bersani's own party is already split on this specific issue - with a group of key members close to Renzi not hostile to cooperation with Berlusconi. Reggio Emilia Mayor Graziano Del Rio, for instance, told La Repubblica that if Italian President Giorgio Napolitano were to propose a 'national unity government' (which in Italian political jargon is also known as Governo del Presidente, the President's government), Berlusconi's and Bersani's parties should not be "picky" and should work together for the good of the country. Bersani can't afford to just ignore these voices if he wants to preserve his party's unity in the longer term.
- Italy's three largest trade unions - which have close ties with Bersani's party - have explicitly come out against new elections and urged Bersani to form a government "at any cost".
And the world from Germany.......
Tuesday, March 26, 2013
No backing down: Germany comes out swinging over claims it is the neighborhood bully
Given all the Germany-bashing over the last week, in the wake of the Cyprus bailout deal (some of it completely ridiculous), it's easy to forget that the Germans themselves are remarkably united over the agreement. In fact, the feeling is that Germany, collectively, just got a fair bit more assertive over its eurozone policy.
On Friday, before a new agreement was finally reached and with Cyprus’ euro membership on the line, German Chancellor Angela Merkel – reportedly in an angry mood - told MPs from her coalition parties that it was wrong for Cyprus to "test" Europe and that while she preferred to see to see Cyprus stay in the single currency but was prepared for an exit.
And with respect to anti-German sentiments, speaking to ZDF this morning, Finance Minister Wolfgang Schäuble bluntly stated that:
“It is always the case, also in the classroom: When you sometimes have better results, the others, who have difficulties, can be a bit jealous.”German Justice Minister Sabine Leutheusser-Schnarrenberger (FDP) called on EU leaders to show more solidarity with Germany, claiming that:
Meanwhile the opposition SPD and Greens have said they will both vote to approve the deal. It is not just German politicians who are being increasingly assertive. In our daily monitoring of the German press, we've sensed a hardening of tone and rhetoric throughout the crisis, not least in response to the overtly anti-German tone of many of the anti-austerity protests in the south. Referring specifically to the Nazi-themed nature of the protests, Ulrich Clauß argues in Die Welt that:"I wish that that the individuals at the highest levels of the EU including the President of the Commission and the President of the Council also display solidarity with us and defend the Germans against unjust accusations".
“In terms of the endemic prevalence of corruption in government and administration and in close to all parties in their respective parliamentary spectrums, these countries rank alongside third-world dictatorships. On the whole we are talking about countries in which ‘good governance’ seems to be an alien concept… in terms of political culture, there is an extreme divide between North and South in Europe.”Writing in FAZ, Klaus-Dieter Frankenberger argues that:
“The Cypriots like to see themselves as the victims. It is not however their European partners who are responsible for the mess they are in… In the crisis countries many blame their plight less on corrupt elites and bad policies but on the alleged lack of solidarity in the North for which read: neo-hegemonic Germany.”Last week, following the Cypriot parliament’s rejection of the original bailout agreement,Bild columnist Hugo Müller-Vogg argued in a piece entitled “We’re the scapegoats” that:
“Politicians there have acted extremely irresponsibly. Now they are extremely brazen in their demands from those who have solidly managed their economies. Moreover, they insult those who are supposed to help them. Without German guarantees there would be no bailout fund. But of all things we Germans are being hit in the crisis countries not only criticism but even open hatred… If it was not an issue of Europe’s future, there would only be one appropriate response: deal with your own mess”.Writing in Die Welt, Director of the Hamburg Institute of International Economics Thomas Straubhaar describes the Cypriot bailout deal as a “turning-point” in the eurozone crisis,arguing that:
“Up until now, the bankrupt countries have been able to use fear of a domino effect to extort Europe. That is now over because the strong eurozone countries have the better hand – and they should not be afraid to play it”.The implications of a Germany more prepared to assert its viewpoint has huge implications for the future of the eurozone and the EU as a whole. Remember who holds the cheque book...
and....
http://www.spiegel.de/international/europe/german-press-reaction-to-cyprus-bailout-a-891018.html
World from Berlin: Cyprus Chaos 'Doesn't Inspire Hope for EU Future'
Banks in Cyprus will remain closed until Thursday to prevent a run on deposits in the wake of the bailout deal reached on Sunday night that imposes a major levy on big depositors, many of them Russian, and shuts down the second-largest bank, Cyprus Popular, also known as Laiki.
ANZEIGE
Meanwhile, even though the banks have been closed since March 16, large amounts of money have been withdrawn from them, according to Reuters. The news agency quoted an EU source saying the Central Bank of Cyprus had requested more banknotes from the European Central Bank than were warranted in terms of the withdrawals it was reporting to the ECB.
The scale of the outflow isn't known. Money has been moved out in various ways. Transfers for trade in humanitarian products, medicines and jet fuel remain allowed, for example. In addition, Laiki and Bank of Cyprus have units in London which remained open throughout last week and they placed no limits on withdrawals, according to Reuters. Bank of Cyprus also owns 80 percent of Russia's Uniastrum Bank, which put no restrictions on withdrawals in Russia.
Within hours of the bailout being agreed on, the head of the Euro Group of euro zone finance ministers, Jeroen Dijsselbloem, fanned market uncertainty on Monday by saying it would serve as a model for dealing with future euro zone banking crises -- a departure from previous rescues in which taxpayers have had to foot the bill. The comment unsettled investors with assets in larger euro-zone nations and sent share prices and the euro tumbling. Later in the day, Dijsselbloem backtracked and said Cyprus was a special case.
The terms of the bailout have predictably angered Russia, and Germany is once again being vilified for taking a hard line. German media commentators say that while Cyprus brought its problems on itself, the rescue reveals an erosion of solidarity among euro-zone members after three years of crisis. The messy wrangling that preceded the bailout has done lasting damage to the EU, they add.
Conservative Frankfurter Allgemeine Zeitung writes:
"The Cypriots may see themselves as victims, but their European partners aren't to blame for the mess. The case of Cyprus shows how rife alienation and anger are among Europeans: Many in the crisis-hit nations are blaming their plight not on their own corrupt elites or bad governance but on supposedly unsympathetic EU governments, meaning the supposedly neo-hegemonial Germans. The donor countries in turn feel they are the victims of blackmail who are rewarded for their help with insults. At the start of the fourth year of the debt and euro crisis, one can't help but register that trust and empathy have been eroded along the way. It doesn't inspire hope for the future of the EU."
Center-left Süddeutsche Zeitung writes:
"This drastic infringement of property rights was possible due to the unique constellation in Cyprus: Cyprus is the third-smallest country of the European Union, so its political weight isn't very relevant. Cyprus set up a dubious business model that attracted dubious people; they're now being punished, so the burden isn't necessarily hitting the wrong people. The expropriation satisfied the sense of justice of most Germans, and not just them."
"Thirdly, a remarkably poor set of Cypriot politicians refused to see reason for much too long, and in the last week displayed an unpleasant gambling mentality. Anyone who manages in just four days to alienate the entire euro zone, discredit the Euro Group chief, tries to involve Russia in a circumventing maneuver and welds together the German government and opposition in an election year has failed to understand a few basic rules on transparency and policymaking in Europe."
"In this unique combination, Cyprus will remain a unique case. But Europe has changed a lot as a result of this rescue drama. The readiness to show solidarity is eroding by the minute. The euro zone has long since stopped being a brotherhood for increasing prosperity and mutual stability. It has transformed itself into a school of gladiators in which everyone fights for his own advantage and his survival."
Conservative Die Welt writes:
"The solution for Nicosia is no blueprint for dealing with other bank crises. Authorities wouldn't dare to repeat such a procedure in Italy or Spain. If a bank has obtained most of its money from other banks or financial institutions, a radical cut becomes far more complicated because the consequences would eat through the entire financial system. The collapse of Lehman Brothers made this dramatically clear."
"While the international impact of the Cypriot bank restructuring is likely to remain limited, the island nation itself will struggle. Not just rich foreigners but many Cypriot companies will lose a large part of their deposits -- which will inflict major damage on the country's economy."
"The Cypriot compromise is a big experiment. Its outcome will determine how Europe tackles future crises. And whether taxpayers will in future be able to avoid always having to foot the bill for troubled banks."
Left-wing daily Die Tageszeitung writes:
"The case of Cyprus will mean once again that billions of euros will be shifted around. Whenever there's a minor problem, investors in Portugal, Italy or Spain will hurriedly transfer their money to Germany or the Netherlands. They will all try to turn their Spanish or Italian euros into German or Dutch euros. The monetary union may still exist, but it is history nonetheless. Officially we may still have one euro, but in effect we've had 17 different euros for a long time now."
Mass circulation Bild writes:
"The washing machine for illegal Russian money has been switched off! And the Kremlin is fuming. When Cyprus needed savings, Russia didn't lift a finger. Now it's throwing dirt at the rescuers. For Russia's billionaires, Cyprus was a euro colony where they could increase their wealth. It's only fair that they and not the small savers have to pay a high price for rescuing Cyprus."
Left-wing daily Berliner Zeitung writes:
"The European Union too has been damaged. People will remember the rudeness of the German finance minister, who was more focused on public sentiment in Germany than on the welfare of the community. And the politicians have made one thing clear to all investors and savers inside and outside the currency union: If you invest your money in the euro zone, you take on enormous political risks in addition to economic ones. This loss of confidence will have lasting impact, in the crisis-hit nations and far beyond Europe's borders."
-- David Crossland
Spanish Scandal continues to move forward.......
Judges' battle over slush fund ledgers inquiry rages on
New arguments cited in fight between magistrates over investigation into PP's illegal activities
EL PAÍS Madrid 26 MAR 2013 - 13:41 CET
The ongoing fight between two High Court judges over who should lead the investigation into the Popular Party's (PP) alleged illegal financing activities continued on Monday, with one of the magistrates giving new reasons as to why he should be the one to probe information contained in leaked party ledgers.
Judge Javier Gómez Bermúdez answered his colleague, Pablo Ruz, that the so-called "Bárcenas papers" - the balance sheets kept by former PP treasurer Luis Bárcenas - fall under his jurisdiction because they contain information that goes beyond the massive Gürtel kickbacks-for-contracts inquiry that Ruz is handling.
The records show bonus payments reportedly made to top PP officials, including Prime Minister Mariano Rajoy, and donations made by businesses, including large construction firms, over an 18-year-period.
On Friday, Ruz said that the investigation should not be separate from his Gürtel inquiry because there are a lot of companies that show up in the ledgers that he is already investigating, and which may have formed part of the alleged kickback schemes at PP regional and local governments. But his colleague on Monday said that there are more companies and other names in those ledgers that have no connection to the case.
"Gürtel could be part of the alleged illegal financing at the Popular Party, but that is not the crime," Gómez Bermúdez wrote. The two judges have been waging a battle through legal motions for jurisdiction in the case.
http://elpais.com/elpais/2013/03/26/inenglish/1364310858_316010.html
High Court names another ex-PP treasurer as suspect in inquiry
Former Popular Alliance (AP) member, Ángel Sanchís, will have to appear before Judge Ruz
The High Court on Tuesday announced that it has officially named a third former Popular Party (PP) treasurer as a suspect in its ongoing corruption and tax-fraud investigations, which have already ensnared several members of the ruling party.
Ángel Sanchís, who served as treasurer for the Popular Alliance (AP) party, the PP’s predecessor, will have to appear before Judge Pablo Ruz on April 10.
Anticorruption prosecutors have asked Judge Ruz to subpoena Sanchís after determining that he helped Luis Bárcenas, another former PP treasurer who is the target of a money-laundering and tax-evasion investigation, help launder and conceal some 38 million euros in Swiss bank accounts.
Álvaro Lapuerta, Bárcenas’ immediate predecessor, who served as treasurer from 1987 to 2008, has also been named as a target by anticorruption prosecutors in a related inquiry regarding a slush fund that may have been used to pay top PP officials bonuses on top of their regular salaries. The inquiry stems from a series of balance sheets that record the extra pay bonuses as well as donations from private sector officials covering an 18-year period in which both Lapuerta and Bárcenas served as treasurers.
Bárcenas stepped down as treasurer in 2010 when he was indicted in the Gürtel kickbacks-for-contracts investigation, which is being conducted by Ruz.
According to the judge’s order, Sanchís “contacted managers” of Bárcenas’ accounts in Switzerland, “cooperating in the concealment of these accounts of funds that allegedly came from illicit activities.”
Iván Yáñez testified earlier this month before the High Court that he served as a front man for Bárcenas. Ruz said that there are indications that Sanchís was also involved after reviewing evidence from information on money transfers to the United States.
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